Punj Lloyd Ltd. vs Valentine Maritime (Mauritius) ...
2008 Latest Caselaw 94 Del

JUDGMENT

G.S. Sistani, J.

1. The petitioner has filed the present petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking, inter alia, an ad interim injunction restraining the defendant from selling, parting with possession, creating any change or removing/shipping out of India, its plant, machinery and other equipment from the local limits of this Court. This Court vide orders dated 13.5.2005 and 18.5.2005 granted an ex parte ad interim injunction in favor of the petitioner.

2. Brief facts, giving rise to the lis between the parties and eventually the present petition, may first be noticed.

3. The petitioner, namely, Punj Lloyd Ltd., is a company registered in India, having its registered office at New Delhi. The respondent, namely, Valentine Maritime (Mauritius) Ltd., is a Mauritian company having its Gulf representative office at Abu Dhabi. The respondent, on 1.12.2003, had entered into a contract with Gujarat Adani Port Ltd. (GAPL) whereunder the respondent was required to execute the work of designing, engineering and commissioning of section of 48? pipeline between K.P. I.0 to K.P. 0 of length 8.82 Km, including inter tidal portion, located in Mundra Port, Off Mundra, Kutch, Gujarat.

4. In pursuance of the contract dated 1.12.2003, the respondent, on 29.1.2004, entered into a sub-contract agreement No. C0309/SC-01/04 with the petitioner whereby and whereunder the petitioner undertook to provide its know-how, technology, personnel, expertise, experience and other onshore assistance in erection and testing of section of the said 48? pipeline at Gujrat. In terms of the sub-contract agreement, the sub-contract work, priced at US$ 18,66,700, was required to be executed on a ?back-to-back? basis with the main contract dated 1.12.2003. The stipulated deadline for completion of the sub-contract work was 28.12.2004 The respondent, in pursuance of the sub-contract agreement dated 29.1.2004, brought into India its plant, machinery and equipment. The petitioner carried out its obligations under the sub-contract agreement dated 29.01.2004 and completed the sub-contract work on 23.3.2005. Consequently, the petitioner demobilised its equipment and manpower with effect from 24.3.2005.

5. The lis in the present petition relates to certain overdue payments arising in pursuance of the work completed under the sub-contract agreement dated 29.1.2004 The grievance of the petitioner is that the respondent owes to it payments in respect of the various invoices raised by the petitioner for completion of the sub-contract work as well as payments incurred towards extra work, overstay charges, additional joint coating material, double handling consignment, storage, etc. It is vehemently submitted that that the petitioner has been constantly reminding the respondent of the overdue payments but to no avail. Apprehending that the respondent might remove its plant, machinery and equipment from the local limits of the courts in India and thereby evade its payments overdue to the petitioner, the petitioner has knocked the doors of this Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking relief in the following terms:

(1) Restrain the Respondent, its servants, agents and representatives by an ad interim injunction from selling, parting with possession, creating any charge or removing/shipping out of India, the plant, machinery and equipment from the local limits of the jurisdiction the Court.

(2) It is further prayed that the respondent be directed to furnish security in the sum of Rs. 4.00 crore to secure the interest of the petitioner pending the arbitration proceedings.

6. Per contra, the respondent has vehemently resisted the relief sought by the petitioner by putting forth the following objections:

(i) Firstly, presuming that the arbitration clause of the main contract dated 1.12.2003 forms part of the sub-contract agreement dated 29.1.2004, the venue of arbitration being at Ahmedabad, only the local courts over there can adjudicate upon the present petition.

(ii) Thirdly, relying further on the same presumption as aforesaid, this Court does not have jurisdiction to entertain the present petition inasmuch as the parties to the main contract dated 1.12.2003, that is, the respondent and GAPL, do not carry their business in Delhi.

(iii) Fourthly, the sub-contract agreement dated 29.1.2004 does not create an embargo on the respondent from demobilising its plant, machinery and equipment from India.

(iv) Lastly, it is the petitioner who owes money to the respondent, which money the respondent intends to recover in the counter claim.

7. I have heard Mr. J.P. Sengh, learned counsel for the petitioner as well as Mr. Manoj Khanna, learned counsel for defendant at length as well as perused the documents brought on record.

8. It is trite that the existence of an arbitration agreement or an arbitral clause is the sine qua non for contracting parties to refer their disputes to arbitration or avail from this Court any interim relief in terms of Section 9 of the Arbitration and Conciliation Act, 1996. Although there is no precise formula to determine whether a particular clause in a contract is an arbitral clause, it is trite that the intention of the parties to refer the disputes to arbitration must be amply manifest in such clause for it to qualify as an arbitral clause. (See, Punjab State and Ors. v. Dina Nath reported at \, Bihar State Mineral Development Corporation and Anr. v. Encon Builders (I) Pvt. Ltd. reported at , Rukamani Bai Gupta v. Collector of Jabalpur and Ors. reported at .)

9. Reliance may also be placed on K.K. Modi v. K.N. Modi and Ors. reported at , which lays down the following test for determining whether or not an agreement constitutes an arbitration agreement:

16. Among the attributes which must be present for an agreement to be considered as an arbitration agreement are:

(1) The arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement,

(2) That the jurisdiction of the tribunal to decide the rights of parties must derive either from the consent of the parties or from an order of the Court or from a statute, the terms of which make it clear that the process is to be an arbitration,

(3) The agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal.

(4) That the tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness towards both sides,

(5) That the agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law and lastly.

(6) The agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal.

10.In the context of the test laid down in K.K. Modi v. K.N. Modi and Ors. (supra), it is noteworthy that the sub-contract agreement dated 29.1.2004, when read in its entirety, does not manifest the intention of the parties to refer their disputes to arbitration. Learned counsel for the petitioner, however, has relied upon Article 32 of the contract dated 1.12.2003 entered into between GAPL and the respondent to evince the existence of arbitration clause between the parties. The said Article 32 of the contract dated 1.12.2003, as cited in the petition, is extracted hereunder:

ARTICLE 32 ? ARBITRATION

32.1 Any dispute or difference arising out of or in connection with this CONTRACT or its implementation and interpretation of any of the provisions of this CONTRACT or application of any terms and conditions or any matter or thing in any way connected with or in connection with or arising out of the CONTRACT on the rights, duties or liabilities of any Party under the CONTRACT, whether before or after the termination of the CONTRACT, which are not settled amicably between the Parties shall be referred to Arbitration under the provisions of the Arbitration and Conciliation Act, 1996 or its statutory modifications.

32.2 The Arbitration shall be carried out by a panel of three Arbitrators. The Parties shall appoint their own Arbitrator and bear the cost of its own Arbitrator, who in turn shall appoint the Presiding Arbitrator, whose cost shall be borne equally, which shall constitute the Arbitral Tribunal. If the other Party fails to appoint its Arbitrator, the Party appointing Arbitrator shall take steps in accordance with the Arbitration and Conciliation Act, 1996.

32.3 The venue of Arbitration shall be at Ahemadabad, India.

32.4 The Arbitration shall be conducted in English language. The Laws of India shall apply to Arbitral proceedings and in constructing the provisions of this agreement.

32.5 The Arbitrators shall pronounce a reasonable written award at the end of the Arbitration proceedings. The parties agree that the decision of the panel of the Arbitrators shall be final and binding. The Arbitrators may award such interim reliefs as deemed fit and shall have the right to award costs.

32.6 The Parties agree that the Arbitral award may be enforced against the parties to the Arbitration proceedings or their assets wherever they may be found and that a judgment upon the Arbitral award may be entered in any court having jurisdiction thereof.

32.7 The fees and expenses of the Arbitrators and all other expenses of the Arbitration shall be borne by the parties equally. The Arbitrators may provide in the Arbitral award for the reimbursement to the prevailing party of its costs and expenses in bringing or defending the Arbitration claim, including legal fees and expenses incurred by a party.

32.8 Pending the submission of and/or decision on a dispute, difference or claim or until the Arbitral award is published, the parties shall continue to perform all of their obligations under the CONTRACT without prejudice to a final adjustment in accordance with such award.

11. Learned counsel for the petitioner has adduced that Article 32 of the contract dated 1.12.2003, having been included as an attachment to the sub-contract agreement dated 29.1.2004, is to be reckoned as the relevant arbitral clause between the parties. Attention of this Court has also been drawn to Article 2.1. of the sub-contract agreement dated 29.1.2004 which stipulates that the sub-contract work there under shall be executed on a ?back-to-back? basis with the main contract dated 1.12.2003 between GAPL and the respondent.

12. The aforesaid averments of the petitioner, I am afraid, do not inspire confidence in this Court. Except for plainly citing Article 32 of the contract dated 1.12.2003, the petitioner has not brought on record a copy of the said contract. If the contract dated 1.12.2003 was indeed included as an attachment to the sub-contract agreement dated 29.1.2004 and the sub-contract work stipulated there under was to be executed on a ?back-to-back? basis with the main contract dated 1.12.2003, the said contract ought to have been filed by the petitioner Along with the said sub-contract agreement. Considering that the sub-contract agreement dated 29.1.2004 between the parties is conspicuously silent as to the existence of arbitral clause, this Court is not incumbent to believe that Article 32 of the contract dated 1.12.2003 between the respondent and GAPL is indeed to be reckoned as the relevant arbitral clause between the parties.

13. Interestingly, the respondent has not explicitly questioned the applicability of Article 32 of the contract dated 1.12.2003 to the sub-contract agreement dated 29.1.2004 On the contrary, learned counsel for the respondent, by premising his objections on the presumption that Article 32 is applicable to the sub-contract agreement dated 29.1.2004, has only questioned the jurisdiction of this Court to decide the present petition. Presuming that Article 32 of the contract dated 1.12.2003 is the relevant arbitral clause governing the parties herein, learned counsel for the respondent has first and foremost submitted that the venue of arbitration being at Ahmedabad as per Article 32.3, only the local courts over there can adjudicate upon the present petition. On the basis of the same presumption, it is further submitted this Court does not have jurisdiction to entertain the present petition inasmuch as the parties to the main contract dated 1.12.2003, that is, the respondent and GAPL, do not carry their business in Delhi nor the subject matter of the contract is situated within the limits of this Court and also no part of cause of action has arisen within the jurisdiction of this Court.

14. As part of his arguments, learned counsel for the respondent has further drawn the attention of this Court to Section 2(1)(e) of the Arbitration and Conciliation Act, 1996, wherein the word ?Court?, for the purposes of the said Act, has been defined as ?the Principle Civil Court of Original Jurisdiction in a district, having jurisdiction to decide the questions forming the subject- matter of the arbitration, if the same was the subject-matter of the suit?. It is thus submitted that the subject-matter of the purported arbitral proceedings between the parties, that is, the sub-contract work as envisaged under the sub-contract agreement dated 29.1.2004 being carried out in Gujarat, only the Courts in Gujarat have the jurisdiction to decide the present petition.

15. To further substantiate his point, learned counsel for the respondent has relied upon Globe Congeneration Power Limited v. Sri Hiranyakeshi Sahakari Sakkere Karkhane Niyamit reported at AIR 2005 Kant. 94, wherein a Division Bench of the Karnataka High Court, while interpreting Section 2(1)(e) of the Arbitration and Conciliation Act, 1996, has observed that the said definition is both inclusive and exclusive. It specifically includes High Court in exercise of its ordinary original civil jurisdiction within the ambit of the definition of ?Court? and excludes Civil Courts of a grade inferior to such Principle Civil Court and Courts of Small Causes. The Court further observed that there is no reference in Section 2(1)(e) to the place where the parties reside, dwell or carry on business. The jurisdiction of the Court is made dependent not on any of these factors, but solely on the subject-matter of the arbitration. Relating the observations in Globe Congeneration Power Limited v. Sri Hiranyakeshi Sahakari Sakkere Karkhane Niyamit (supra) to the present application, learned counsel for the respondent has vehemently contended that the subject-matter of the impending arbitration proceedings being in Gujarat, the Courts in that state alone would have jurisdiction.

16. I find force in the contentions of the respondent. It is noteworthy that the sub-contract work, which is precisely the subject-matter of the impending arbitration proceedings between the parties, was carried out in Gujarat. The petitioner has neither denied nor challenged this factual aspect of the disputes between the parties. Moreover, on a prima facie perusal of the various invoices that were raised by the petitioner to the respondent during the execution of the sub-contract work, as appended on pages 18-23 of the paper book, show that the said invoices were dispatched from the site camp office of the petitioner at Gujarat. Thus, keeping in mind the position of law in Globe Congeneration Power Limited v. Sri Hiranyakeshi Sahakari Sakkere Karkhane Niyamit (supra) that the jurisdiction of a Court under Section 9 whilst deciding a petition under Section 9 of the Arbitration and Conciliation Act, 1996 is dependent on the place where the subject-matter of the arbitration is situate, I am of the view that this Court would not have the jurisdiction to adjudicate upon the present matter.

17. Learned counsel for the petitioner, however, rejoins that this Court has the territorial jurisdiction to entertain the present petition inasmuch as a part of the cause of action took place in Delhi. It is adduced that the sub-contract agreement dated 29.1.2004, which is the subject-matter of the present petition, was executed between the parties at the registered office of the petitioner at Delhi and thus the Courts at Delhi have the jurisdiction to entertain the present petition.

18. It is noteworthy that the petitioner has introduced the plea of this Court having jurisdiction only in its rejoinder. The present petition under Section 9 of the Arbitration and Conciliation Act, 1996 is conspicuously devoid of a single averment as to how the Courts at Delhi would have jurisdiction to entertain the present petition. Even the sub-contract agreement dated 29.1.2004 between the parties show that it was executed at New Delhi. It is also noteworthy that albeit the sub-contract work was carried out by the petitioner at Gujarat, the petition is conspicuously silent as to the place where the plant, machinery and equipment of the respondent in respect of which the respondent is seeking injunction is lying. It is thus amply evident that the petitioner, by contending that the sub-contract agreement dated 29.1.2004 was executed at New Delhi and thus the Courts therein have jurisdiction, has deliberately tried to offset the trite position of law in Globe Congeneration Power Limited v. Sri Hiranyakeshi Sahakari Sakkere Karkhane Niyamit (supra) that the jurisdiction of a Court under Section 9 of the Arbitration and Conciliation Act, 1996 is dependent on the place where the subject-matter of the arbitral proceedings is situate. Even otherwise, it is axiomatic that an assertion made in the rejoinder for the first time can hardly provide a proper basis for an argument which the petitioner has belatedly and deliberately coined to support his plea.

19. The specious character of the petitioner's pleadings is further laid bare from Clause (a) of the prayer clause of the plaint which reads as under: ?a) Restrain the respondent, its servants, agents and representatives by an ad interim injunction from selling, parting with possession, creating any change or removing/shipping out of India, the plaint, machinery and equipment from the local limits of the jurisdiction of the Indian Courts?

20. Considering that the principle relief sought in the petition is to restrain the respondents from selling, parting with possession, creating any charge or removing its plant, machinery and equipment from the local limits of ?Indian Courts?, the petitioner ought to have per force clarified the local limits of which ?Indian? Court would have jurisdiction to entertain the present petition. This coupled with the fact that the petition could not have invoked Section 9 of the Arbitration and Conciliation Act, 1996 without first crystallising the relevant arbitral clause governing the parties.

21. Lastly, whereas it is no longer res integra that the Court while disposing of a petition under Section 9 of the Arbitration and Conciliation Act, 1996 has jurisdiction to afford interim measures even before the commencement of the arbitration proceedings and appointment an arbitrator, nevertheless, the Court must also be satisfied that the petitioner will in the meanwhile take effective steps for commencing the arbitral proceedings. A party invoking Section 9 of the Arbitration and Conciliation Act, 1996 must be able to satisfy the Court that the arbitral proceedings are actually contemplated or manifestly intended and are positively going to be commenced within reasonable time. What is reasonable time will depend on the characteristic facts and circumstances of each case and the nature of the interim relief sought would itself give an indication thereof. (See, Firm Ashok Traders and Anr. v. Gurmukh Das Saluja and Ors. reported at and Sundaram Finance Ltd. v. NEPC India Ltd. reported at .

22. In view thereof, an equally important facet of the present case that has caught the attention of this Court is that although the present petition was instituted on 12.5.2005 and an ad interim ex parte injunction was granted on 13.05.2005 and thereafter the order was modified on 18.05.2005, the petitioner has failed to point out as to what affirmative steps has the petitioner taken qua appointment of an arbitrator to resolve disputes and differences pursuant to filing the petition under Section 9 of the Arbitration Act, 1996. It thus appears to me that the petitioner was only interested in obtaining the ad interim ex parte injunction but had no intention of fulfillling its obligation for appointment of an arbitrator.

23. These 'convenient ommissions' ostensibly made by the petitioner, as underlined by this Court in the foregoing paragraphs, are indeed staggering. I find the petition to be misconceived and thus liable to be rejected. Interim orders dated 13.5.2005 and 18.5.2005 consequently stand vacated. The petition is dismissed with costs of Rs. 20,000/-.